Daniel Jacome of Catablast submitted to us a copy of a fundamental analysis stock report on COSTCO (COST).

Here is a snippet of the report.

Investment Recommendation:
We encourage investors to HOLD Costco and weather any temporary blips in share prices. COST’s fortune rests on consumer spending patterns, fuel prices, and its ability to compete with Wal-Mart/Sam’s Club cost advantage and mass retailers like Target, which does not charge membership fees. Nevertheless, continued success in the grocer category – as well as addition of more private label goods to the inventory mix – should lead to slight margin expansion and ultimately, a higher valuation in the marketplace. Should Costco hit another stride, we believe the firm will continue to leverage its cash-flush balance sheet by aggressively repurchasing its stock and paring down debt/equity by as much as 200 bps. A possible Fed funds rate cut in Q107 could create further upside for COST shares — with shares floating near our fair price level, we encourage investors to buy judiciously on pullbacks.

Customer Loyalty Remains Robust:
Costco has found its profit pool in the fees it charges members to join, which creates a high switching cost once customers have paid in. Membership renewal rate of 86% is sustainable, in our opinion. Recent penetration of the grocer category as been an overwhelming success for Costco (fresh food sales in Q4 surpassed every other merchandise category), which could help narrow the gap between Costco and behemoths like Kroger and Wal-Mart, which lead overall US grocery sales. We estimate that Costco’s membership fee, which accounts for 72.5% of EBIT and generates recurring revenue streams, will grow at a 5% CAGR over the next 3 years.

View the full fundamental analysis of COSTCO (COST). Thank you Daniel for sharing your analysis!

KLA-Tencor Corporation (KLAC) was founded in 1975 in San Jose – California, United States.

KLAC operates for the design, manufacture and marketing of process control and yield management systems for the semiconductor and other related microelectronics industry, areas in which it is the world leader.

KLA-Tencor offers a range of products and services that are used by every wafer, integrated circuit manufacturers and photomask manufacturers from all over the world; the company provides inline wafer defect monitoring; critical dimension metrology; reticle and photomask defect inspection; wafer overlay; film and surface measurement, and overall yield and fab-wide data analysis.

KLAC’s current products portfolio can be divided in 4 different groups, those being; Metrology, Defect Inspection, Data Storage and Customer Service and Support, Yield Management Software Solutions; the company also provides refurbished (cleaned and repaired) KLA-Tencor certified tools, along with warranty and support.

The semiconductor industry grew almost 25% in 2005, while the semiconductor equipment industry grew over 60% last year. Analysts are forecasting that the semiconductor revenue growth will slow to approximately 10% and semiconductor equipment revenues to decline by approximately 7% over the current year.

Over the longer term, KLAC expects the process control to continue to represent a high percentage of their customers’ capital spending.

KLA Tencor employees are now over 5,500 and its full market capitalization is over 9 Billion Dollars.

On the fiscal year ended last June 30, KLAC achieved a profit margin of near 18% and an Operating Margin near the 18.15% area.

With total revenue of around $2 Billion, the company’s revenue per share was over $10 in 2005.

Akamai Technologies, Inc. (AKAM) is a Cambridge – Massachusetts, United States Company, incorporated in 1998. I pointed out the AKAM stock chart technicals a few weeks ago.

This company is doing business around the Internet area, by providing services for improving and accelerating the delivery of content and applications over the World Wide Web. The company’s solutions portfolio is designed to aid governmental agencies, businesses, and other enterprises; their tools help improve the revenues and reduce the costs by maximizing the performance of the online businesses.

The Company’s worldwide distributed platform (already in 69 countries) includes more than 18,000 servers in more than 950 different networks.

Last year Akamai Technologies began commercial efforts for selling its Web Application Accelerator service, a solution designed to improve the overall performance of Web and Internet protocol based applications. At the same time the Company also made public 2 free information tools: the “Net Usage Index for Retail”, that measures Internet traffic, and the “Net Usage Index for News”, which covers and tracks online consumption of news at selected sites and portals.

On the fiscal year that ended on last 31st December, the company achieved a Profit Margin of 91.69%, along with an Operating Margin of 21.39%, while its total revenue was $349.84 Million, which means something around $2.35 per share.

Their improved financial results in 2005, when compared to previous years, reflect the company efforts to increase their monthly recurring revenues and at the same time to reduce the expenses needed to support such growth.

Shares at Nasdaq ( NasdaqGS:AKAM ) ended the trading day at $39.98, winning 1.14%, even though still a bit lower than the 52 week high at $42.

PW Eagle, Inc. (PWEI) is a US company which headquarter is located in Eugene – Oregon. The company was founded in 1984 and it was formerly known as Eagle Plastics, Inc.; its name changed to Eagle Pacific Industries, Inc. in 1995.

PWEI manufactures and distributes polyvinyl chloride (PVC) pipe and fittings that are used for potable water and sewage transmission, for turf and agricultural irrigation, for water wells, fibber optic lines, electronic and telephone lines and for commercial and industrial plumbing. The Company distributes its products all over the United States, and provides also a minimal amount of shipments to a couple of selected foreign countries.

PWEI owned subsidiary, USPoly Company LLC (USPOLY), manufactures and distributes polyethylene (PE) pipe products and other accessories.

PWEI had a very successful 2005 on various fronts. Throughout 2005 and 2004, their operating performance has continued to improve; both volumes and margins increased in 2004 and 2005 compared to 2003, and their resulting cash flow from operations in 2005 was much higher than the year before.

The company’s net sales increased by $219 million last year, compared to 2004. Of this increase, over $166 million was due to higher volume and pricing in PVC products, and rounded $47 million was due to the UAC acquisition late in 2004.

PWEI, a company with over 1000 employees, generated a profit margin of 10.25% last year, while its Operating Margin achieved almost 17.49%.

Shares were trading at the Nasdaq (NasdaqGM:PWEI) at $33.85, near its 52 week high a bit over the $35 level.

Wynn Resorts, Limited (WYNN) is based in Las Vegas, Nevada, US. WYNN owns, develops and operates destination casino resorts.

Wynn Resorts is the owner and operator of Wynn Las Vegas, a casino resort on the Strip in Las Vegas which offers 2674 rooms and suites in its 45 story tower, 36 fairway villas, and 6 private-entry villas designed only for premium guests.

WYNN is also constructing the future Wynn Macau, a casino resort development, located in the Macau Special Administrative Region of China, which is scheduled to open to the public in the third quarter of this year.

These days, WYNN is also working on an expansion of Wynn Las Vegas, which will be named “Encore”. In addition to all these investments, Wynn Resorts has also submitted to the Macau Government an application looking for a new land concession of 54 acres, these targeting the future development of casino facilities; and still continues exploring opportunities to develop additional gaming and/or other related businesses in different domestic and international markets.

WYNN’s “Wynn Las Vegas” operations are still the major support for their operating cash flow. Prior to opening Wynn Las Vegas, the company had not commenced operations, nor has it generated any significant revenues.

For the fiscal year that ended on 31st December 2005, WYNN incurred a net loss of over $90 million, which represents over $113 million (or a 56% decrease) from the net loss of around $204 million for the previous year (2004) and a $50.7 million from 2003.

Overall, these results reflect the cycle of increasing pre-opening expenses, as Wynn Las Vegas approached its opening hour. For last year, the profit margin of the company was a negative 4.73%, though their operating margin was 6.41% positive.

Shares (NasdaqGS:WYNN) ended their trading day at $77.60 a bit lower than their high at $80.19.

Daktronics, Inc. (DAKT), is a company from Brookings, South Dakota – USA, that develops its business around the marketing area, by providing design, development, and support of visual display solutions.

Daktronics products include timing systems, digit displays, sound systems, indoor and outdoor scoreboards and statistics software for the sports area; video, graphics, animation and controllers that manage the display’s operation for the commercial area; and an all set of different electronic displays for the transportation area.

On the fiscal year that ended on last April 29th, Daktronics, Inc’s revenue rose about 34% to $309 Million and its net income rose more than 34% to around $21 Million. Revenue improvement reflects the increase in demand from their clients, mostly outdoor advertising companies, and higher sales of their standard galaxy product (commercial area). Expenses with product design & development, as well as new selling efforts have offset part of the Net income. Their Profit Margin rounds 6.8%, while Operating Margin is near 10.28%.

Daktronics recently reported fiscal 2007 first quarter net sales of over $92 million and a net income of $5 million, meaning $0.12 per each diluted share, while a year ago the results were lower at $0.11 per diluted share.
According to company records, Daktronics is achieving a more solid performance each quarter, mostly sponsored by business in Asia, where fiscal incentives are supporting the investment and business growth of the company in the region.
Jim Morgan, CEO of the company stated at the results presentation that:

“We estimate net sales for the second quarter of fiscal 2007 will be in the range of $95 to $105 million, with earnings in the range of $0.13 to $0.18 per share. Earnings per share estimates include the impact of stock option expensing of approximately $0.01 per share. With our performance in the first quarter, we are increasing our estimate of net sales for the year to be in excess of $372 million, up more than 20% for the year as a whole.”

Daktronics, Inc. is trading near the $22.50 level at the Nasdaq, almost $10 bellow its 52 weeks high at $31.14, but yet much higher than the low at $10.

EGY, Vaalco Energy, is an independent energy company founded 22 years ago in Houston, Texas. This company explores, transforms and produces crude oil and natural gas at its Texas Golf facilities and offshore in West Africa – Gabon.

In the end of 2005 this company had reserves of 7827 million barrels of crude oil and 21 million cubic feet of natural gas.

This year the company will develop its new discovery at Avouma/South Tchibakla by setting up a new platform and pipelining it to the FPSO field. Still regarding this year’s investments, the platform in Louisiana will be ready during the summer, with its first production expected by the end of the 2006 fourth quarter.

With an operating margin of 76.12%, this margin comes exclusively from the difference between the income (received prices) and the production costs of the previously referred commodities.
The recent drops in the USD rate exchange versus other major currencies like the GBPound and the Euro are affecting the company’s results (both operational and financial); this is mostly due to the fact that its offshore operations are denominated in the local currency (tight to the Euro) and not in Dollars as it is domestically.

The net cash generated by the operating activities last year was nearly $36 million, a growth of more than $23M when compared to 2004.

This company’s primary capital resources come from operations cash flows, equity sales, money debt purchase and borrowings. At the end of last year the cash balance was near $44 million.
Together with this years operating profit, the company believes its cash balance will be enough to fund the development of the Avouma field and to make a few additional investments in working capital.

Stocks closed at $8.46 on August 14th, almost 20% down from the 52 week maximum at $10.45.